In Libor Scandal, a Push For Criminal Charges

Lawmakers on Thursday urged action in the global investigation into interest rate manipulation on Wall Street, pushing authorities to pursue criminal charges against central players in the scheme.

In a letter to financial regulators and Attorney General Eric Holder, a dozen Democratic senators expressed concern that some of the world’s biggest banks were rigging a rate that affected how consumers and companies borrow money.

In June, regulators and the Justice Department imposed a $450 million fine on Barclays, which was accused of improperly influencing rates to deflect concerns about its health and bolster profits. The case against the British bank was the first action to stem from a multiyear investigation into how key benchmarks, including the London interbank offered rate, or Libor, were set.

The authors of the letter, including Jack Reed of Rhode Island and Carl Levin of Michigan, say they hope the Barclays case is the harbinger of things to come.

“Much more needs to be done,” the senators wrote. “Banks and their employees found to have broken the law should face appropriate criminal prosecution and civil action.”

The Justice Department has disclosed a criminal investigation into wrongdoing surrounding Libor. Barclays struck its settlement with the Justice Department, Commodity Futures Trading Commission and the Financial Services Authority of Britain.

In addition to Mr. Holder, the lawmakers sent the letter on Thursday to the nation’s top financial regulators at the Financial Stability Oversight Council.
Mr. Reed and Mr. Levin spearheaded the effort, attracting other prominent figures in the Democratic Party.

They received support from lawmakers who have jurisdiction over the Justice Department and over the regulators pursuing the Libor investigation. Patrick Leahy, a Vermont Democrat who leads the Senate Judiciary Committee, and Sherrod Brown, an Ohio Democrat sitting on the Senate Banking Committee, also signed the letter. House Democrats plan to echo the senators’ calls in a letter currently circulating Capitol Hill.

“We urge the Department of Justice to carefully investigate and aggressively prosecute all senior bank officials who participated in manipulating the London interbank offered rate,” wrote Representative Peter Welch, a Vermont Democrat.

Authorities around the world are investigating more than 10 big banks, including UBS, JPMorgan and Citigroup. The banks also face private lawsuits from local governments and investors who rely on Libor, the benchmark for trillions of dollars in mortgages, student loans and other financial products.

“This can, and likely did, hurt millions of American families, businesses and municipalities,” the senators wrote.

Some questions have emerged in recent days about whether regulators turned a blind eye to years of misconduct at Barclays. Barclays has disclosed that it informed regulators — including the Bank of England and the Federal Reserve Bank of New York — that other institutions were also understating their Libor submissions.

”This scandal calls into further question the integrity of many Wall Street banks and whether our prosecutors and regulators are up to the task of regulating them,” the senators wrote.